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2016 (10) TMI 475

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..... rganisational structure gone through - Held that: - on organisational structure, it cannot be held that all the units are controlled by one person - decision in the case of M/s. Nova Industries (P) Ltd. Versus CCE- Chandigarh [2015 (5) TMI 99 - CESTAT NEW DELHI] relied uponwhere it was held that all the units are having separate machinery, separate registration number and dealing separately.There is no financial flow back and there is no mutuality of interest between the units. Therefore, all the four units cannot be clubbed together - issue answered in favoe of respondents. Clandestine removal of goods - Held that: - in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) discovery of such finished g .....

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..... the respondents on account of that the clearances of four units should be clubbed together and the benefit of SSI exemption should not be given and demanding duty on account of clandestine manufacture and clearance of excisable goods by the respondents. The matter was adjudicated, the Commissioner in the impugned order set aside charges alleged against the respondents and dropped the proceedings initiated through the show cause notices. Aggrieved with the said orders, the Revenue is in appeals before this Tribunal. 3. Learned AR submits that the Commissioner has fell in error and without considering confessional statements made by the respondents during the course of investigation and over emphasised irregularity in search and seizure procedure and completely ignored hostile atmosphere created by the respondents at the time of search. It is his submission that during the investigation, the police was required to be called and thereafter certain records were resumed. He further submitted that the findings of the adjudicating authority is not correct by holding that the show cause notices should have been issued to the main units which controlled all the other three units and the .....

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..... ances, working of the staff under the directions of two persons among the respondents. The arrangement of initial and later investments were made by the two cousins and/or the other family members. Providing of security, by the family members, against the cash credit limits/loans taken from the financial institutions also corroborates the department's allegation of clubbing of clearances. In view of the above submissions, it i prayed that the impugned orders to be set aside. 7. On the other hand, learned Counsel appearing for the respondents submitted that all the four units are created separately and claiming the benefit of SSI exemption. In the adjudication, the SSI exemption sought to be denied by clubbing the clearances of the respondents. The allegation of clandestine clearance is based on the data obtained from the ICC set up under the Punjab General Sales Tax Act and some allegedly incriminating records, allegedly recovered during the search operation. 8. Learned Counsel heavily relied on the impugned order particularly paras 4.10, 4.11, 4.24 and 2.97 of the impugned order which are reproduced as under: 4.10 A number of grave irregularities have been alleged by .....

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..... fication of stocks of raw material and finished goods carried out at different premises is reported to have been completed in all the four entities. The noticees have alleged that it is humanly impossible to verify such huge quantity in such a short period. For example in the case of DPL a huge quantity of 80/874 kg of ERW Pipes of 14 different diameters and different lengths, when the number of packets/bundles were 2365 and number of pipes in a bundle varies, besides huge quantity of scrap, both weighing 169.074 Mts in 2640 packets of different weights are stated to have been weighed within 5.30 hrs. Likewise in the case of GPL a quantity of 1, 19,154 kgs. has been shown verified within three hours while the goods were in 31 different sizes of pipes of 3654 bundles having different sizes an weights. In NIPL the quantity verified goes as kgs in a matter of 3 hours 45 minutes . similarly in the cases of MAPL 62, 225 kgs have been shown verified in a matter of 7 hours. The Dy. Director DGCEI, Ludhiana, in reply to Commissionerate's letter dated 17.03.2005, vide their letter dated 28.03.2005 has pointed out that the loss of Annexure 'A' of the panchnama was noticed in .....

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..... her panchas in the beginning but changed them later due to any hostilities. Their statement in their letter dated 28.03.2005 that these panchas had to be engaged due to hostilities at the raided venue-when police had to be called-indicate that searches were started if not fully carried out, without panchas, moreover, panchas have admitted that they remained seated in their respective taxies outside the raided premises and that corroborates that panchas did not witness the search operations. Further, in panchnama drawn on 29.11.2001 at the manufacturing premises of M/s NIPL, it has been stated that the search was conducted in a peaceful manner whereas in the letter dated 28.03.2005 of Deputy Director DGCEI, Ludhiana it has been mentioned that the search was conducted in very uncooperative/hostile atmosphere. 4.24 This clearly shows that the show cause notice issuing authority has admitted that all the 4 companies are the manufactures. The above position is further established from the fact that duty form all the 4 manufacturing units in respect of clubbing has been demanded on an independent basis i.e. to the extent of their respective clearance. If the show cause notice issuin .....

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..... Sha Subhash Chander disowned the note book 007 and other note books were not recovered from him and his statement subsequent to search were recorded under threat of arrest. The learned counsel explained that the search was conducted in a vexation manner with clear malicious intention of building a false case. He has pointed out that Panchnama in M/s GPL was not signed by any representative of M/s GPL. The factory of M/s NIPL was set up in the year 1997-98 since the numerous officers of Central Excise Deptt has visited the factory and found the record lying there and signed them. Similarly, the factories of M/s GPL, and M/s MAPL were inspected, thus the allegation that the record of M/s MAPL and M/s GPL were found in the M/s NIPL does not stand to reason. In fact, all records were available in the premises of the representative units and were takne deliberately to M/s NIPL. He has pointed out that Sh. Megh Raj was summoned for recording the statement by the officers of DGCEI on 09.01.2002 when his statement was extracted under the trheat of arrest and ultimately Sh. Megh Raj was arrested on the same day. The learned counsel has referred the DGCEI s application for seeking judicial .....

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..... ELT 45 (P H) 23. Suntrek Aluminium p. Ltd. Vs. CCE, 2013 (288) ELT 500 (guj) 24. Kuber Tobacco Products Ltd. Vs. CCE, Delhi, 2013 (290) ELT 545 (Tri. Delhi) 10. He also relied on the CBEC circular No.6/92 dated 29.05.1992 wherein the Board has issued the direction that limited companies whether the public or private are separate entities, distinct from the shareholders composing it and hence each limited company is a manufacturer by itself and will be entitled to a separate exemption limit. 11. With regard to the issue of clubbing of clearance, he submits that the demand has been raised on the basis of data collected from ICCS of the Punjab Govt. It was alleged in the show cause notice that sales were being effected by the manufacturing units through three trading firm. It is his submission that sales tax assessments of three firms have been finalized for the period of dispute after verifying the data from ICC and no efforts were made by the by the investigating officers to prove veracity of the data obtained. As the sales tax assessments are already finalised, therefore, allegation of clandestine sale of the finished goods through three trading firms are not sustainabl .....

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..... ead, write or speak English, the language in which panchnama was prepared. They were the drivers of the taxies, which brought the raiding officers from Ludhiana to Dirba and received-remuneration from the raiding organization and did not belong to the locality where the searches were carried out. They have admitted that, as taxi drivers, they remained seated outside in their respective taxies when the searches were carried out and merely signed the papers at the behest of the officers without being able to read or understand the contents. Sh. Mandeep Singh pancha admitted that he studied Only upto class IV, does not know English nor can read Punjabi. He was not read out anything before being made to sign various papers, whose contents he had no idea' Nearly same is the case with other pancha Sh. Pawandeep Singh. In the case oi DPL one of the panchas is a taxi driver with similar lack of credentials as stated above. The other pancha has also stated during cross examination that he arrived only around 8 pm to collect money from workers to whom he had sold karyana goods. same is the case in respect of nearly all other panchas as already explained in the record of the personal he .....

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..... re found missing in Sept., 2004. The existence of these documents is now being established by DGCEI, Ludhiana on the basis that when Sh. Ashok Kumar applied for anticipatory bail, their bails were granted after perusal of the case file by Hon'ble Session judge of Ludhiana. Since only valid and authentic documents could be file in the court of law, it would be reasonable to presume that such documents were indeed lawfully created. As regards, the background of the panch witness, it has been stated by DGCEI, Ludhiana that the search was conducted in a very un-cooperative/ hostile atmosphere and in these circumstances it was not possible to get the witnesses from the locality and further that the panchnama was explained to the panchas in local language. It has a/so been stated by the officers that photocopies constitute valid evidence under section 36Bof the Central Excise Act. 4.11 As regards the background of the panchas, I am unable to convince myself with the arguments tendered by the Dy. Director DGCEI, Ludhiana. Panchas have to be selected before the operation is begun. Officers have to make themselves available for search so that the possibility of planting anything at .....

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..... documents cannot be relied upon to allege the allegation of clubbing of clearances of the units on the basis of said records as the panch witnesses are independent persons were not present at the time of search. In the show cause notices, the photocopies of the documents which are not available in original has been relied on by the revenue is not admissible evidence in light of the decision of the Apex Court in the case of J.Yashoda vs. Shobha Rani-2007 (212) ELT 458 (SC). 16. In view of the above, we hold that panchnama is not admissible evidence as discussed above and the photocopies of the documents are not admissible evidence. Therefore, the issue No.1 answered in favour of the respondents. Issue No.2 17. To deal with the issue of clubbing of clearances, we find that the organisational structure of all four units is as under: 1. M/s.Dibra Pipes Pvt.Ltd.(M/s.DPL), is a private limited company in which the following persons have been shown on paper, as Directors:- (i) Shri Ashok Kumar S/o Sh.Des Raj, New Grain Market, Dirba Mandi-148035 (ii) Sh. Megh Raj S/o Sh. Hari Ram, New Grain Market, Dirba Mandi-148035 2. M/s.North India Pipes Pvt.Ltd.(M/s.NIPL), is .....

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..... ts are separately registered under the Central Excise although and fall within the same the Central Excise range and division; All the units registered as SSI unit with the Directorate of Industries, they have their own investment of capital, machinery and work force; They have their own financial sources and credit facilities; All units have separate factories and manufacturing facilities; All the units have purchased the machinery owned by them and also all the raw materials required for manufacturing from their own resources; All the salaries, wages are paid by the all the units from their own sources of finance; All the units have their own Sales Tax and Income Tax Registration; All the units had paid their own electricity Bills; All the units have separate electricity and telephone connections. 19. These facts have not been controverted by the Revenue. The only allegation is that Shri Ashok Kumar and Shri Meghraj have controlled all the four units having common directors in all the units. In fact as per organisational structure, they are not the directors in all the four respondents company and there are common directors in all four respon .....

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..... payment of duty by availing SSI exemption of both the units separately. The only allegation is that sometimes, salary of one of the employees was paid by the other firm or they are managed by one person. Moreover, the dealers get the commission on the combined sales of both the companies. These things cannot constitute that there was a mutuality of interest and therefore, clearances of one unit cannot be clubbed with the clearance of other unit. 17 . We find that this issues has come before the Tribunal in various cases whereas in the case of Bullows India Pvt Ltd, v. CCE, reported in 2012 (284) E.L.T. 584 (T) (supra) wherein this Tribunal has observed as under: We find that in the present case the issue is whether the appellants are entitled for the benefit of Notification 175/86-C.E. and subsequently Notification 1/93-C.E., therefore, the ratio of the above decision of the Hon'ble Gujarat High Court is fully applicable on the facts of the present case. The Hon'ble High Court held that the Revenue has to establish that there was mutuality of interest or financial flowback of the funds and in such cases the clearances of the holding and subsidiary private limit .....

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..... ndon Union of India - 1993 (66) E.L.T. 375 (Raj.). Similarly, in the case of M/s, Electro Mechanical Engg. Corporation v. CCE Jaipur - 2003 (152) E.L.T. 194 (Tri.) Girish Electricals Industries v, CCE, Mumbai - 2004 (167) E.L.T. 299 (Tri.) it was held evidence of common office premises, common staff and common maintenance of records, etc. cannot be held to be sufficient to club the clearances of the units, who have different registration in all the departments and in the absence of any financial flow back. 19. We further, analyse the decision of Ennar Cements Pvt. Ltd v. CCE reported in 2013 (292) E.L.T. 245 (T) (supra) wherein this Tribunal has observed as under : We have gone through the records of the case carefully. The appellants are two Private Limited Companies. They have separate existence. The investigation reveals that the clearances of one unit were done with the other and vice versa in order to remain with the exempted limit and thereby evading payment of Central Excise duty. If that is the case, the investigation ought to have decided the real clearances of each unit and demanded the duty accordingly in respect of each unit. However, in the present case, .....

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..... by main unit to other units not sufficient to make other units as dummies when they are having independent control or money flow back to the main unit - Clearances not clubbable - Situation not to be confused with that of related person concept under Section 4(4)(c) of Central Excises Salt Act, 1944 - Notification No. 175/86-C.E. dated 1-3-1986 - Section 5A ibid. 21 . In the case of Renu Tandon v. Union of India reported in 1993 (66) E.L.T. 375 (Raj.) Exemption - SSI Exemption - Clubbing of clearances - Two units situated at same premises, manufacturing similar product, having some common management, office and labour and common electric connection - One unit owned by father-in-law and the other by daughter-in-law and work of both units looked after by her husband - In absence of evidence of common finding and financial flow back, two units not treatable as one and their clearances not clubbable Notification No. 175/86-C.E.dated 1-3-1986. 22. In the case of Vivomed Labs. (P) Ltd v, Collector of C.Ex. reported in 1991 (53) E.L.T. 152 (Tribunal) Exemption to SSI Units - Clubbing of clearances - Units registered separately under Income-tax Act, Sales Tax ha .....

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..... rogen gas was sent to the three front companies for compressing and bottling the gas. The sole object was to avail benefit of exemption given to small scale industries under the Central Excise Notification No. 1/93, dated 28-2-1993 and thereby evade payment of central excise duty. With a view to unravel the truth Director General of Anti-Evasion (for short 'DGAE') searched the factory and office premises of MACL and the three front companies on 27-9-1996. It was found that all the three bottling units were located in one single shed and were separated from each other by small brick walls of about 4 ft. height. The Directors of the three front companies were employees of either MACL or other Modi Group of companies and they were frequently changed. They had common staff for maintenance of records, and operation of the units. The main plant and machinery i.e. cylinders had been supplied only by MACL and the total finance was provided by MACL as unsecured loans or had been arranged by finance companies whose whereabouts were not even known to the Directors of the three front companies. Marketing of the products was done by one Ritesh Beotra, a so-called Director of SCGCPL who .....

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..... ited. Some goods such as Electric horns received by different customers, from M/s. Heemanshu Traders, were also seized. Detailed examination of records of Heemanshu Traders, Heemanshu Auto Pvt. Ltd., Shri Krishna Industries, M.K. Industries, Shri Hari Industries revealed that all the partners and/or Directors are members of the Shah family and they had mutual interest in the business of each other and that Heemanshu Traders was controlling the overall activities of manufacture and sales of these units. The Department was of the view that Heemanshu Traders had by recourse to fraud, wilful mis-statement and suppression of facts evaded payment of duty in respect of 12285 Kgs. of M.S. Scrap seized from the Truck, did not account for the day to day production of M.S. Scrap in R.G. 1 register, cleared 12323 Electric Horns during the period from 4-4-88 to 7-4-88 without debiting the duty in PLA/RG 23A and that all the units above mentioned along with Shri Vishnu Industries, M.C. Industries and D.G. Auto Industries affixed the brand name of M/s. Heemanshu Traders on Electric Horns and C.B. Points, worked under the directions and instructions issued by Heemanshu Traders from Head Office for .....

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..... no sales took place as per sales tax assessment and there is no corroborative evidence to allege that clandestine removal of the goods by the respondents, moreover, the demand on clandestine clearance is made on assumption and presumption. No calculation has been given and the demand was sought to be distributed in all four respondents manufacturers equally which is against the judicial discipline. Further, as no corroborative evidence to support the allegation of clandestine manufacture, therefore, in the light of the decision of the Arya Fibres Pvt.Ltd. (supra), wherein this Tribunal has observed as under: 40 . After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw materials .....

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